Tips for buying a car when you are upside down on a loan
I owned a 2002 VW Jetta that I LOVED. Two years after the purchase I made a horrible mistake and refinanced the car with my credit cards financed into the new loan (first HUGE money mistake there). My new car payment was $550/month. A little hefty but I thought I had done the right thing. Two more years go by and I realize that my car needs brakes, tires, etc. Not to mention I owed almost $5000 more than the blue book (being upside down is owing more than its worth). I was in big trouble. If the car would have been totaled, I would have had to continue to pay the $5000 and purchase a new vehicle. The following was my way out and hopefully it will help you…
I wanted a car with warranty and GAP insurance. SO I figured out what dealerships were selling my Jetta for (around $15000) and what it was worth ($9000). I also did my research on line to find out what new cars had rebates or cash back offers. This is the important step. Be informed before you even go to the lot. This way you know what models are in your price range, which models have the best offers, and what you can talk your trade-in up to.
After I located the car I wanted, I talked to the salesman about my trade-in. Their first offer was around $7000 but since I knew the blue book AND what they could sell the car for, I was able to talk him up to $10,000. This plus the $3000 rebate on the new vehicle, I was just up-side down on my old car loan by $1000. I put $1000 down on the new car, basically canceling out my old car loan that I was upside down on. After my trade in, rebate, and down payment, I basically bought a brand-new car with zero down.
Be careful though, b/c they didn’t make alot on your trade in, they try other tricks and ways of getting your money. I will suggest that you purchase GAP insurance. That is a must have. Your car goes down in value by almost 30% the second you drive it off the lot. Without GAP insurance, you have to cover the amount between the blue book and what you owe.
The down side to what I did is that now, I have another 5 years that I am paying on a car. But, my payment is $150 less per month and I have a warranty again. Its not my favorite car in the world, but in 5 years, I’ll own it!
Hope this helps! 